After two rounds of negotiations, China and the United States finally reached a consensus that they would not fight the trade war. On May 19, they issued a joint statement, announcing that they have reached a consensus on many areas, such as reducing the trade deficit between the United States and China.
Liu He, the special envoy of China’s Chairman Xi Jinping, the politburo member of the CPC Central Committee, the vice premier of the State Council and the Chinese leader of the U.S.-China Comprehensive Economic Dialogue, said that his visit to the U.S. is an active, practical, constructive and fruitful visit as the two sides agreed to abandon the trade war and stop increasing tariffs on each other, which is the biggest achievement of the U.S.-China economic and trade negotiation.
The U.S. Treasury Secretary Mnuchin said on the May 20th that the U.S.-China economic and trade consultations, concluded not long ago, have made significant progress and both sides will continue to maintain consultations on economic and trade issues.
Wei Jianguo, former vice minister of Commerce and vice chairman of the China Center for International Economic Exchanges (CCIEE), said in an exclusive interview with China Fortune Bond (CFB) that China has done a great job in the negotiation.
China and the U.S. have found a smart solution
CFB: How do you evaluate the outcome of the U.S.-China economic and trade consultations?
Wei Jianguo: This U.S.-China trade friction can be seen as the largest trade conflict since the establishment of diplomatic relations between China and the United States. There might still be some trade disputes in the future but the trade war is basically over.
The outcome of the U.S.-China economic and trade consultations demonstrate that China did a great job. First of all, China not only made the United States understood the vision of China’s opening up in the future but also showed the United States what kind of opportunities the US companies will get from China’s reform and opening up, which should satisfy the United States.
Second, the consultations enabled the two countries to clarify all the issues and avoid any possible misunderstandings. In particular, we have made ourselves very clear regarding the issue of trade deficits, which concern the United States the most. I think that the U.S. fully understand our propositions now due to the effective communication between the two sides.
Third, the United States explained their demands and the Chinese side will take a gradual approach to meet those demands. That means China will work on reducing the trade deficit in the short-term and solving the problems in relation to the trade cooperation between the two sides in the medium- and long-term. All these have been included in the joint statement.
President Trump, his cabinet members and the secretary of treasury met with the Chinese delegation, implying that the U.S. side attached great importance to the consultation. They also highly value ??the outcome of this consultations.
CFB: How are the short-term, medium-term and long-term issues concerning the U.S.-China trade relations are expressed in the joint statement?
Wei Jianguo: First of all, we must understand what we can buy from the United States: energy, agricultural products, and service trade. The expansion of imports in these areas is beneficial to both parties.
Second, can the United States open more sectors to China, even the high-tech products that are not allowed to be exported to China. This kind of ban was actually a product of the cold war and does not suit the current situation at all.
Third, both parties should jointly enlarge the total trade between the two countries. China is stepping up its efforts to open its market. For example, China’s consumer market has close to 350 million middle-class people, who need high-quality products and consumption. The U.S. companies are welcome to enter China’s healthcare industry, financial services and other areas. China is increasing its reform and opening up and enhancing its protection of the intellectual property rights. All these are medium- and long-term economic and trade issues need to be resolved.
CFB: How do you see the problem of reducing the U.S. trade deficit with China?
Wei Jianguo: The U.S. hopes that China can reduce the trade deficit significantly but this is out of our control. The trade deficit with China is caused by market behavior and only the market can determine what to buy or sell. Therefore, the U.S. requires us to reduce a certain amount of trade deficit within a certain period of time through government intervention, I am afraid we will not be able to do so. This has nothing to do with our willingness. We are willing to solve problems through consultation but we also have our bottom line.
Some people say that the agreement could be achieved because China made a compromise, I am afraid I can not agree with them. Both Chinese and the U.S. delegations worked so hard and used their wisdom to solve the issues they have and the results are conducive to both sides. China did not make unilateral compromises.
Comprehensive trade cooperation in five major fields
CFB: One of the items included in the joint statement is to encourage two-way investment and create a fair and competitive business environment. What impact will this one have on the investments of both China and the United States?
Wei Jianguo: First of all, I have to say that this proposal is made by the Chinese delegation because China has always been the biggest victim of the current global trade rules. The investments of Chinese companies in the United States are often hampered due to the so-called national security law. Although some of the Chinese investments have been approved, the decision is entirely in the hands of the U.S. Therefore, we demand a fair treatment for both Chinese and American investment. The U.S. will have some new measures for investments from China in the future and we have to make sure that Chinese companies will be treated properly and fairly.
Second, the U.S. has always believed that the U.S. companies are being treated unfairly in China, especially in the financial sector, or in the face of competition from state-owned enterprises. In fact, this is a misunderstanding. China’s reform and opening up has gone through several stages and in the future, all the enterprises will be treated equally, regardless of the state-owned enterprises and private enterprises, foreign-funded or Chinese-funded enterprises. That means they will enjoy the same opportunities and rights while abiding the same rules. China is bounded to further increase its reform and opening up and the Chinese leaders have already made it clear that we have to do this sooner rather than later. At the same time, we also ask the United States to treat Chinese enterprises fairly.
I think that the two sides have already sent a very clear signal: China and the United States will quickly boost their investments in a wider area and in a more transparent environment. The investment of China and the United States, especially the U.S. investment in China, will experience a sharp increase.
CFB: China’s Vice Premier Liu He said in an interview on the May 19th that China and the United States will strengthen trade cooperation in energy, agricultural products, medical care, high-tech products and finance. How do you think the cooperation in these fields will begin?
Wei Jianguo: These five areas are all very important and the enlarged cooperation shows that we are solving the problem in an orderly and comprehensive manner.
Now that both China and the United States have agreed to increase exports of agricultural products and energy from the United States, and the U.S. will send a delegation to China discussing specific issues. These are the products that the United States want to export to China and are also needed by China. We can start with our talks on these products first but in the near future, we will have more consultation on the areas such as U.S. oil, LNG (liquefied natural gas) and so forth, involving the establishment of relevant facilities, price and other issues.
In terms of agricultural products, China has stopped investigating imported sorghum originating in the United States and allowed it to be imported, apart from soybeans, corn and oats. Even some animal products, like meat and dairy products are also given a green light. Those products are needed by China and we can start with them right away.
Medical care and high technology are the strengths of the United States. China has launched many measures to open up its medical care industry, such as tariff-reduction and organization of the first international import expo. In the aspects of medical and high-tech cooperation, the United States agreed to strengthen joint research in the future. I believe that China’s imports in these two areas will exceed the imports of energy and agricultural products in terms of total amount and variety.
More importantly, China has now introduced a number of measures to liberate its financial sector, such as relaxing the share-ratio restriction, allowing sole proprietorship, and easing the market entry threshold. The U.S. financial institutions can enter the Chinese market and share the dividends of China’s economic development.
We will be able to see a positive outcome in these fields and in the long run, the measures mentioned above are good solutions to expand the trade between China and the U.S. and gain mutual benefits and win-win results.